feie-foreign earned income exclusion
Foreign Earned Income Exclusion (FEIE)
May 16, 2018
Professional Tax in India
May 19, 2018

Form 8938 vs FBAR – Understanding the Difference

Last Update Date : May 03, 2019
Estimated Read Time: 4 min

comparison of form 8938 and fbar

Most U.S. Taxpayers are aware of the forms they must file annually with the IRS.  However, many American Indians or Expats are unaware of the compliance requirements of fbar and 8938 form filing.  While, at first glance these two forms may seem similar, the differences are many, which this guide will outline.

What is Form 8938?

Form 8938 is filed annually with your tax return to the IRS, which details the information of all your foreign financial assets and accounts.  The purpose of this form is to ensure every U.S. taxpayer is compliant with tax laws and not evading taxes on income earned abroad, as per Foreign Account Tax Compliance Act (FATCA).  Form 8938, also commonly referred to as the FATCA form, is filed to ensure compliance by every taxpayer subject to its laws.

What is FBAR?

Foreign Bank Account Reporting (FBAR) is a simple form filed with the treasury department outlining the details of Financial accounts held in foreign financial institutions.  While, Form 8938 has tax implications, FBAR is only a report outlining the details of all foreign bank accounts held by the taxpayer, so that if a person is evading taxes by hiding his/her money offshore, the IRS can catch them.

[ Read: FBAR in Detail ]

Comparison of Form 8938 and FBAR Requirements:

Question

Form 8938

Foreign Bank Account Reporting

Who Must File?

U.S. Citizens and resident/ aliens (nonresident alien in special circumstances) holding financial assets which fall within the reporting thresholds.Any U.S. citizen, resident aliens, trusts, domestic entities and estates must report their foreign financial accounts that meet the reporting threshold limit.

Are U.S Territories Applicable?

NoYes

When is it Due?

 

It must be filed on the same date as your annual income tax return, which is filed with the IRS.It must be filed by April 15th of every year (extension till October 15th available)

Where is it Filed?

 

To the IRS with your annual income tax returnThrough BSA’s e-filing System.

What Must be Reported?

 

Maximum value of all foreign assets, including financial accounts and foreign investmentsThe details of all financial accounts held in the foreign country.

What is the Reporting Threshold?

 

The reporting threshold varies from $50,000 to $600,000 depending upon factors such as married, unmarried, joint account or single account.  Click to see the details of form 8938 thresholdIf the total of all foreign accounts held exceeds $10,000 at any time during the calendar year, even if is only by $1.

How are account and asset values determined?

 

The market value can be calculated using the currency rate at the end of the taxable year, as per form 8938 instruction.The maximum value according to the bank account statements, converted into U.S dollar as per the exchange rate at the end of year.

Penalties

 

The penalty for non-disclosure is $10,000 with an additional $10,000 for every thirty day cycle of non-filing post receiving a notice from the IRS.  Criminal prosecution is also a possibility.In non-willful cases, the fine can be up to $10,000 and if found that non-disclosure was intentional then penalties up to $100,000 or 50% of the account balances, whichever is greater.  Criminal prosecution is also possible.

What Foreign Assets are Reportable?

Below is a list classified as assets, which are reportable under FBAR and Form 8938.

Types of AssetForm 8938FBAR
Directly held foreign currencyNoNo
Precious MetalsNoNo
Jewelry, Cars, Antiques, etc.NoNo
Social Security from Foreign CountryNoNo
Mutual Funds From Foreign CountryYesYes
Domestic Mutual Funds/SecuritiesNoNo
Foreign life-insurance or annuity contract containing cash valueYesYes
Foreign equity and hedge fundsYesNo
Directly held foreign real estateNoNo
Foreign real estate held through foreign entityNoNo
U.S Bank account held in a branch in a foreign countryNoNo
Foreign Account with Signatory AuthorityNoYes
Foreign Stocks and Securities from a foreign country in a foreign financial institutionYes, but contents to be reported separatelyYes, but contents to be reported separately
Foreign stocks and securities not in a financial accountYesNo

 

Partnership interest in foreign countryYesNo
Interest in Foreign financial assets through an entityNoYes, if ownership or beneficial interest is sufficient
Financial accounts in foreign financial institutionYesYes

How to Determine if You Have Interest In a Foreign Account or Asset?

You have financial interest if you have signatory authorities or if you have authority over more than one foreign account.  You are required to report the foreign financial account information of accounts which have exceeded $10,000 at any time in the calendar year, even if it is for a single day.

Persons working for federally regulated banks or federally regulated publicly traded corporations, having signatory authority, but no financial interest may be not be required to file Foreign Bank Account Reporting,  For detailed information about guidelines in reporting FBAR, read the exceptions of Foreign Bank Account Reporting.

How H&R Block Can Help you?

The filing of FBAR and Form 8938 is mandatory for American Indians and expats, failure to which is punishable by jail time, in certain scenarios.  To ensure you report all your financial details to prevent complications in the future, enlist the aid of U.S tax experts at H&R Block India.

How’s your tax refund doing this year? Not sure?

Get a Tax Pro from H&R Block to get you the best refund starting at $75 only
Leave a Rating!
4.9 (20 Votes)
Mohammadfaruq Memon
Mohd. Faruq Memon is the Head of U.S. Expat Tax Services at H&R Block (India) with an industry experience of fifteen years. He holds a masters-level qualification and his expertise lies in Dual Taxation. On weekends, Faruq is a movie buff who also enjoys watching cricket!

Still Have Questions?